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Clarksville, TN – The Federal Open Market Committee left short-term interest rates unchanged, as expected, and did not alter its forward guidance (on short-term interest rates) or the monthly pace of asset purchases.
In the policy statement, the FOMC noted that growth had been “modest” in the first half of the year, that mortgage rates had risen “somewhat,” and that a persistent low trend in inflation could present some risks for the economy. All of which suggests that a tapering in the rate of asset purchases will be delayed. However, investors should still expect some tapering by the end of the year.
The economic data were mostly on the strong side of expectations, but nonfarm payrolls rose less than the stock market was hoping for. Payrolls rose by 162,000, while the two previous months were revised a net 26,000 lower. The Unemployment rate fell to 7.4% (from 7.6%), but that was due to a drop in labor force participation and a sharp drop in the rate for young adults (which suggests seasonal adjustment issues).
Real GDP growth rose at a 1.7% annual rate in the advance estimate for 2Q13 (that figure will be revised, and revised again), but the estimate of 1Q13 GDP growth was revised lower (to +1.1%, from +1.8%). Comprehensive revisions to the GDP figures did not alter the pattern of growth over the last few years by much (other than the downward revision to 1Q13), although personal income figures were revised higher.
The ISM Manufacturing Index was much stronger than expected, but it’s only one month and the comments of supply managers were relatively cautious.
Next week, the economic calendar cools down considerably.
Consumer Money Rates
Treasury Yield Curve – 08/02/2013
S&P Sector Performance (YTD) – 08/02/2013
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Tax Equiv Muni yields (TEY) assume a 35% tax rate on triple-A rated, tax-exempt insured revenue bonds.
The information contained herein has been obtained from sources considered reliable, but we do not guarantee that the foregoing material is accurate or complete. Data source: Bloomberg, as of close of business August 1st, 2013.
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